Enterprise in capital constrained markets presents a number of risks and challenges including lack of access to formal finance to sustain businesses and insurance to protect against losses. This is because low-income business owners do not have the funds to participate in the formal capital markets or insurance sectors or if they do, they are classified as high risk and are penalized with higher interest rates. Starting in the late 1960s, microfinance as a service has become a viable alternative for low-income business owners to protect themselves against shocks while operating their businesses. Microinsurance has also become an invaluable tool to help the poor who disproportionally face greater risks from perils like sudden death of a family member, poor health and environmental dangers like fires and floods to mitigate risks as they operate their businesses.
The growth of microinsurance as an industry has created opportunities for well-funded and established actuarial and consulting firms like Milliman for involvement. The MicroInsurance Centre at Milliman which was acquired by world renowned actuarial firm in October 2017 serves as a bridge between regulated insurers and intermediaries helping to provide microinsurance products to assist low income business owners. The work of this organization pertains to product development, research, advocacy and projects centered on servicing low income people around the world. Since its inception over twenty years ago, the MicroInsurance Centre has carried out microinsurance projects in over seventy countries. The Centre’s mission statement is to “Create simple, understood, accessible, valuable, efficient (SUAVE) microinsurance products with value for clients, which represent a business case for the insurer and distribution channel.”
This capstone project is a full stack development tool to educate the public about inclusive financial services like microfinance and microinsurance.
The project was inspired by published research the primary investigator conducted with female entrepreneurs in Ghana as an undergraduate student at the
University of Pittsburgh and conversations about microinsurance the researcher engaged in while working as an intern at Milliman during graduate studies at the University of Chicago.
Small business owners living in developing nations like Ghana face a number of structural problems that impeeded them from growing their businesses. For example, one female entrepreneur expressed that when a massive fire gutted Makola Market in Accra where her shop was located, she had to start over from scratch. Another woman said that selling goods in the market was physically exhausting leading to chronic health problems like back pain. Since she didn't have access to formal education growing up, trading in the public market was her only means of generating income apart from farming to make enough money to pay for her kids' school fees. Microfinance along with pooling together capital through susu were tools many women used to sustain their businesses.
Although microfinance is very helpful, it wouldn't have protected these female entreprenuers with insurance for when perils like fires, floods and other natual disasters occured or provided them with life and health insurance. For instance, flooding is a common natural occurance in the greater Accra region where these business were located. Even if a woman had the finances to grow her business, it takes just one flash flood to wipe everything away. This is where microinsurance comes into play.
While completing an internship at Milliman, I became aware of the importance of microinsurance as a protective tool for low-income business owners.
I sought to apply my skill sets in economic research, statistics and data science, as well as web design to educate the public about the importance of microfinance and microinsurance. This project is a culmination of acquired technical knowledge. Since data is richer in the microfinance space, analysis of a large dataset using classical statistics and machine learning was conducted. An overview is included in the embeded presentation below. I designed this website to showcase interactive visualizations of pertinant microinsurance data along with notes from research that shed light on this field.
I would like to thank my capstone advisor, Danny Ng, an instructor at the University of Chicago and Mariah Mateo Sarpong, Project Manager/Knowledge Management Specialist at the Microinsurance Centre at Milliman. Their guidance was much appreciated in putting together this independent project.